Pepsi downplays rumors about merger with Mondelez

Analysts speculate PepsiCo may be ripe for merger talks.Washington Post

PepsiCo Inc. says it isn't interested in any big deals after a report suggested a mega-snack food deal could bring its Doritos under the same roof as Oreos.

The Purchase, N.Y., company, which owns Frito-Lay, Quaker Oats and Gatorade, issued a short statement Friday after the Telegraph of London said activist investor Nelson Peltz could push it to merge with Mondelez International, which makes global snack brands such as Nabisco and Cadbury.

The report cited unnamed sources saying Peltz, who is known for making big investments in companies then forcing change, has been building stakes in the two companies in recent weeks.

In a short statement, PepsiCo said that it doesn't comment on market rumor or speculation.

"As we've said before, we are making strong progress in our strategy to deliver long-term growth and create shareholder value," the company said.

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Mondelez International Inc., which split from Kraft Foods Group Inc. last year, also said it was satisfied with its portfolio as it stands.

A representative for Peltz's Trian Fund Management declined to comment.

PepsiCo has long been the subject of speculation that it would spin off its underperforming beverage business. CEO Indra Nooyi tried to squash such talks last year with a "Power of One" marketing campaign that featured the company's sodas alongside its chips. At the same time, however, the company has been reviewing options to restructure its North American beverage business and recently said it would postpone providing more thoughts on the matter until early next year.

In particular, the company said it wanted to see how a new sweetener system it has in the works plays out.

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"We certainly wouldn't want to make a change in the business structure while there's still opportunities to unlock value that might be better unlocked while PepsiCo still owns the business," Chief Financial Officer Hugh Johnston said in a call with reporters in February.

If PepsiCo were to spin off its beverage business, Consumer Edge Research CEO Bill Pecoriello has noted that the company would likely look to make a major acquisition to remain as big as it is today.

Ken Goldman, a JP Morgan analyst, noted that a merger between PepsiCo and Mondelez would "present a series of challenges," in part because Mondelez has an array of individual products that could be too complicated "to appeal to a larger suitor at this time." He also noted that the size of the company could raise antitrust issues. But Goldman also said he wouldn't take any potential interest by Peltz lightly.Associated Press